FGV Annual Report 2018

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018 335 01 02 05 03 07 06 04 08 09 ANNUAL INTEGRATED REPORT 2018 EXAMINED OUR NUMBERS 60 SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (CONTINUED) (viii) APL was acquired by FGVH in 2014 for cash consideration of RM568 million, resulted in goodwill on acquisition of RM513 million. At the date of acquisition, the fair value of net assets of APL included external borrowings of RM517 million assumed by FGVH group, which had been subsequently settled by FGVH on APL’s behalf. The Board is of the view that effectively FGVH had paid a total of RM1,081 million for its investment in APL. The goodwill which arose from the acquisition of APL had been assessed for impairment on an annual basis in accordance with MFRS 136 “ Impairment ” as part of the Palm Upstream group of cash generating units ( “ CGUs ” ), as this group of CGUs is expected to benefit from the synergies of the combination, which represented the lowest level within the Group at which goodwill was monitored. On this basis, the goodwill had been assessed as fully recoverable. APL has been loss making since acquisition, despite efforts undertaken by management to improve its performance due to several challenges faced by APL in particular due to its geographical location, labour shortages and weather. APL had also suffered crop losses over the years, which require significant efforts to rehabilitate the estate assets. Management has reorganised its reporting structure to reviewAPL operations separately from the other PalmUpstream operations with effect from the quarter ended 30 September 2018. Accordingly, the goodwill on the acquisition of APL has been retained in APL. Based on the impairment assessment performed subsequent to the reorganization of its reporting structure, an impairment loss of RM513 million has been recognized in the consolidated financial statements for the period ended 30 September 2018. (ix) On 1 October 2018, FGV changed its registered address to Level 21, Wisma FGV, Jalan Raja Laut 50350 Kuala Lumpur. (x) On 12 October 2018, Encik Ahmad Tifli Dato’ Haji Mohd Talha resigned as the Group Chief Financial Officer ( “ GCFO ” ). Puan Aznur Kama Azmir, Head of Group Finance Division was appointed as the Acting GCFO of FGV on 18 October 2018. (xi) On 24 October 2018, Datuk Wira Azhar Abdul Hamid was appointed as an Interim Chief Executive Officer until a new Chief Executive Officer is appointed. This appointment on an interim basis had been concurred by the Minister of Finance (Incorporated). The Special Board Committee 2, which took over the responsibilities to perform the functions of the GP/CEO since 18 September 2018 was disbanded. His current role as Chairman of FGV Board remains unchanged. (xii) On 23 November 2018, the Board of Directors announced that the Company has commenced legal proceedings in Kuala Lumpur Court against 14 defendants consist of former Directors and Employees of FGV. The suit concerns the Company’s acquisition of 100% equity interest in Asian Plantation Limited ( “ APL ” ) via a voluntary conditional cash offer in 2014. The Company brought this action for loss suffered from their failure to discharge their respective fiduciary duty, duty of fidelity and/or duty to exercise reasonable care, skill and diligence. The Company seeks the damages totalling RM514 million for loss arising from the acquisition of APL, general damages with 5% interest rate per annum starting from the date of the filling of the suit until the date of full and final settlement; costs with 5% interest rate per annum on the amount of costs awarded starting from the date when the costs was awarded until the date of full and final settlement as well as other reliefs that the Court deems fit and proper. TheCompany is currently assessing the financial impact arising from this litigation andwill make a further announcement at a later date. However, there is no impact on existing operations.